Skip to main content

Now, the UK's Telegraph worries about loss of local jobs

While the topic of the "backlash" is getting quite boring, what makes The Telegraph article reasonably interesting is that a) it is well written, and b) it throws some new numbers from a study of the efficiencies of financial services outsourcing conducted by accounting and consulting firm Deloitte & Touche. (*At last*, the media has found an alternative to the mysterious Forrester Research report--which supposedly says 3-m plus US jobs are set to go "poof" becuase of offshore outsourcing.)

(Some extracts by way of general background--ie, stuff that everyone--at least, in India--knows about:)

When the chairmen of the big UK banks and insurers get together, all they want to talk about is how fast they are relocating operations to India - and although they are all gung ho about it, they are slightly anxious about whether the Government will weigh in to slow the trend....

Centres in India handle the processing of student loans, queries about utility bills for Powergen and flight bookings for British Airways. A series of other British companies, including BT, HSBC, Prudential and Aviva, are shifting their call centres to the world's biggest democracy....

The big question is how America and Britain will cope as these forms of employment become extinct in their home economies. (Deloitte & Touche) estimates that 2m jobs in financial services alone are likely to move from developed economies to emerging nations in the next five years. Across all industries, the exodus of services jobs could be 4m....

(Here come the portions with the numbers:)

By 2008, financial services firms are expected to have transferred $356bn, or some 15 per cent of their total cost bases, to less developed countries, according to a recent study by Deloitte.

This would equate to annual bottom-line savings of $138bn, or an average of $1.4bn for each of the world's top 100 financial services companies. For leaders such as Citigroup and HSBC, there could be savings of two or three times that level.

By any measure the potential cost-savings are enticing. Processing costs, for instance, are estimated to account for about 20 per cent of a retail bank's total cost base.

A conservative saving of 20 per cent of that could lead to a 4 per cent improvement in the banks cost/income ratio - a key measure of efficiency - and a 2.5 per cent boost to its return on equity, according to Mercer Oliver Wyman, the consultant. In turn, these benefits could lead to an increase of 10 per cent to 12 per cent in the market value and share price of the average bank.

So banks such as Citigroup and HSBC are transferring even more jobs. Citigroup now employs 3,000 people in India in call centres and processing operations in Mumbai and Chennai. Analysts argue this has helped the group become the world's most profitable financial services firm: its revenues have grown by $35bn in the past five years, while costs have increased by just $12bn.

(The article's conclusion:)

But while the debate rages, it is clear that the economic forces at work are unstoppable. "We have to relocate these functions to India," says the chairman of a large British bank. "Not only are the running costs a fraction of what they would be here, but the quality of the workforce is significantly better. Taking advantage of that is a no-brainer."

(Extracts end)

Click Here to read the full The Telegraph article.

Popular posts from this blog

VC Interview: Shailendra Singh of Sequoia Capital India

In a recent interview to Venture Intelligence, Shailendra Singh discussed some of the firm’s newer investments in the early stage segment including in the online payments space, the progress at a few existing portfolio companies and the active role the firm is playing in helping its portfolio companies scale and succeed in India and globally. Prior to joining the firm in 2006, Singh was a strategy consultant at Bain & Company in New York and before that, an entrepreneur in the digital media industry. Venture Intelligence: How does Sequoia go about identifying potential early stage investments in India? Is there anything different you are doing today than, say, a couple of years back? Shailendra Singh: There is a lot more focus on technology investing and early stage investing. In general, as you might remember a few years ago, we were doing primarily growth investing but in the past 18-odd months, we have had a very strong focus on early stage and that’s continuing. In terms

Ambit tops League Table for Transaction Advisors to Private Equity deals in 2019

Ambit Corporate Finance topped the Venture Intelligence League Table for Transaction Advisor to Private Equity Transactions for the year 2019. Ambit advised PE deals worth $2.4 Billion (across 4 qualifying transactions) during the period. Citi ($1.1 Billion across 2 deals) and  Avendus  ($969 million across 12 deals) took the second and third spot. Edelweiss Financial Services ($758 million across 9 deals) and  PwC  ($708 million across 15 deals) completed the top five in 2019.  The  Venture Intelligence League Tables , the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Financial and Legal Advisory firms. Ambit Corporate Finance advised the $1.9 Billion buyout of Pipeline Infrastructure from Reliance Industries   by Brookfield Asset Management  and the IFC and I Squared Capital-backed   Cube Highways' acquisition of Delhi-Agra Toll Road from Reliance Infrastructu

ChrysCapital, Motilal Oswal PE & Sequoia named PE-VC Firms of the Decade

Press Release ChrysCapital, Motilal Oswal Private Equity and Sequoia Capital India have been named the top Private Equity & Venture Capital investors in India during the last decade, as part of Venture Intelligence’s APEX Awards. The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer.  While ChrysCapital won the “Private Equity Investor of the Decade” award, Motilal Oswal Private Equity was feted as India’s “Growth Capital Investor of the Decade”. The Indian arm of the storied Silicon Valley VC firm, Sequoia Capital, was named the country’s “Venture Capital Investor of the Decade”. The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms as well as "crowd sourced" nominations and voting from the Limited Partner, PE-VC and advisory communities. (The main criteria were Exit Track Record, New Fund Raises & Fo

Inventus, Sixth Sense, Blume & Norwest win Apex'20 Venture Capital Awards

Inventus Capital Partners, Sixth Sense Ventures, Blume Ventures and Norwest Venture Partners were voted the top Venture Capital investors in India during 2019. The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. Other 2019 winners in the VC segment included  Axilor Ventures which was voted   the  Accelerator of the Year for the second year running, 3one4 Capital (VC Fund Raise of the Year) and Innoven Capital (Venture Debt firm of the Year). The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms as well as "crowd sourced" nominations and voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Exit Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies).    " It is an honour to be recognised by entrepreneurs and investors as

Jio deals help PE investments climb 12% in H1'20 to $18.8 B

Press Release With Reliance Industries' communications unit Jio Platforms attracting 51% of the investment value, Private Equity-Venture Capital (PE-VC) investments in India rose 12% during the first 6 months of 2020 to $18.8 Billion (across 341 deals), shows data from  Venture Intelligence , a research service focused on private company financials, transactions and their valuations. Investments totaling over $9.5 Billion in Jio by a troop of global private equity firms, following social media giant Facebook's $5.7 Billion mid April investment in the company, helped overall PE-VC investments better the $16.8 Billion (across 503 transactions) invested during the same period in 2019. (Note: These figures include Venture Capital investments, but exclude PE investments in Real Estate).   Jio Platforms' $9.5 Billion Private Equity haul (excluding Facebook’s strategic investment) was led by Middle Eastern and American investors with KKR, Saudi Arabia's Public Invest